Economic recovery for the Hudson Valley hinges on bringing private sector jobs to the region

Feb. 25, 2012

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Poughkeepsie Journal

Jobs have been in decline, and must be rebuilt if the area’s economic vitality is to be preserved.

That requires an effort known as economic development, which now rises to the fore more than it has since the early 1990s when IBM Corp.’s massive downsizing struck hard.

The Great Recession took its toll. But even before that, there were cracks in the once-firm ground on which the valley’s economy rested.

Many of the big industries have shrunk or disappeared. Even the usually steady government sector has gone into decline.

This all matters. It matters to anyone who has a stake in the valley, anyone who wants to stay here, anyone who owns property, any taxpayer.

And that’s why two words are important: economic development.

“We’re all tied to the economy,” said Michael Oates, president of the region-wide nonprofit that works on this area, the Hudson Valley Economic Development Corp.

“The basis of economic development is to provide opportunities for people to work and make money and raise a family and to do whatever they want to do in their lives,” he said.

For some, the search for that has been long.

“I’d like a job, my goodness,” said Stephen Brinckerhoff of the City of Poughkeepsie, who has had only part-time or short-term work for three years.

Never a term that tends to excite or capture the imagination, economic development right now needs a reintroduction.

It is, simply, efforts to attract investment, which leads to job creation, which leads to increased money in the economy, which in turn leads to more jobs.

Economists call it a virtuous cycle; the opposite is a vicious one.

Jobs are not created because somebody wants to create jobs.

Jobs are the consequence of entrepreneurial effort, mostly. Government can create jobs by fiat and have the taxpayer pay, but in this country, the public sector is by far the smaller one.

For example, in the seven-county Hudson Valley region, about 81.4 percent of the jobs were in the private sector, using the most recent state data for 2011.

Those jobs were created by industries that make products that people want to buy, or by service businesses or nonprofit institutions that help people with this need or that desire.

In understanding how economic development works, it’s important to separate primary development from secondary.

The primary kind is what people like Oates work on, those big job-generators which many localities are competing to land.

Primary generators are companies or institutions that could be located anyplace but that draw their money from far and wide. Much of it comes home to the economic benefit of the spot in which they do land.

When IBM makes a million-dollar mainframe computer at its Poughkeepsie plant, it may be shipped anywhere in this country or many others. But the jobs and the payroll are here.

When Sono-Tek Corp. makes one of its sophisticated spray systems and ships if from its plant in Milton to a customer far away, the money comes back here.

When students come from other counties, states and nations to colleges such as the Culinary Institute of America in Hyde Park or Marist College in Poughkeepsie or others, their tuition and fees become part of this economy.

The inflow of money then begins to create what economists call the “multiplier effect” as secondary development results.

That includes businesses and services needed by the people who came to work at the primary sources. It’s everything from stores and entertainment to doctors and insurance agents and includes local government. These jobs grow where the primary jobs landed, because that’s where the people are.

State and federal government can go either way. Many of those jobs are secondary, but from the viewpoint of a local economy, they can be primary. For example, the numerous state prisons in Dutchess and Ulster counties help make the state one of the region’s top two employers, the other being IBM.

Job growth necessary

So how is the jobs picture today?

Not as good as it used to be, measured by either of the two usual yardsticks. One is total number of jobs in an area and the other is unemployment.

The most recent jobless rate for Dutchess County was December’s 7.2 percent. Ulster’s was 7.8 percent and the Hudson Valley region came in at 6.9 percent. All are below year-ago numbers, a sign of progress, but all are still far above the levels of what were once the good times when Dutchess saw rates in the 3 and 4 percent range.

Jobs in the Hudson Valley showed an uptick in the state Department of Labor’s most definitive survey, a quarterly census.

In the most recent report, there were 874,098 jobs for the second quarter of 2011 in the region that includes Dutchess, Ulster, Orange, Putnam, Westchester, Rockland and Sullivan counties. That was a gain of about half a percent. The recent peak was in the last year before the Great Recession, 2007, when there were 906,134 jobs counted.

That’s still 3.5 percent down from the peak. Recent results may be better, based on estimates from the labor statisticians.

Dutchess County’s picture was dimmer than the valley’s.

The county’s peak local jobs, using the same data source, came in 2006. In the second quarter, the count was 118,839. The number fell in 2007, 2008, 2009, 2010 and even in 2011, when it reached 111,178.

The drop of 7,661 jobs is a fall of 6.4 percent.

With fewer jobs but more population in Dutchess, more commutation is the answer. The U.S. Census Bureau estimate for 2006-2008, the most recent one published, was that more than 39,000 residents journey to jobs outside Dutchess, most of them to higher-paying markets such as Westchester County and New York City.

A large part of historic economic development effort in New York and the local region has been to compete for investments that were looking for a good place.

This works well when it works, such as Gap Inc.’s 1998 announcement that it would build a huge distribution warehouse in Fishkill. At times, that site has employed more than 1,000 people.

Coups like that have become rare. The most recent one was Linuo Solar Group, which bought the former IBM West Campus in the fall and is said to be preparing to start using it this year and hiring about 150 people, and eventually, up to 1,000.

Thomas McQuade, the new chairman of the Dutchess County Economic Development Corp., believes that much of the success in coming years will be from cultivating local entrepreneurs and helping established but young businesses to grow.

Also in that camp is Charles North, president of the Dutchess County Regional Chamber of Commerce, who said, “We all like to land the large corporations and provide 2,000 jobs, and that’s a wonderful thing, but sometimes you’re better off in bringing in 10 little ones.”

“If you lose one, the impact isn’t so bad,” he said.

A major change that has already been put in place is a stronger regional focus. This stems directly from Gov. Andrew Cuomo’s reorganization of the state’s funding program into regional councils of local leaders.

The Mid-Hudson Regional Economic Development Council was formed, submitted its plan and funding applications and got $67 million awarded to 61 projects, but missed out on money for some key initiatives. Its pool was the sixth-largest out of 10 councils.

North speculated that because the mid-Hudson generally does better than most other regions, it may be getting less support.

Most companies looking for sites focus first on broader regions, then narrow it down to smaller units such as counties, and finally, to specific towns or cities and in the end, a piece of property for sale or lease.

The regional council system helps pull together the efforts of the various counties and other regional groups, a benefit that most of them acknowledge but find harder to put into practice.

Now it becomes part of the normal practice.

“What the governor has done, creating it as a regional approach, is in line with what we’ve been doing at Hudson Valley Economic Development Corp. for three years,” Oates said.

It works well, he said. “We give them 10 leads and maybe they select two of the properties that they want to check out,’ he said.

In Dutchess, there’s some reorganization. The Dutchess County Economic Development Corp. lost a position due to the resignation of its president, John MacEnroe. McQuade said there’s not funding to replace it. Catherine Maloney of the staff is filling in as head.

Meanwhile, new County Executive Marc Molinaro got the Legislature to create a spot for economic development in the Department of Planning and Development and filled it with a veteran of the field who has local roots, Ronald Hicks.

Molinaro’s idea is to ensure county government helps knit all the pieces together, including helping people with projects get them through all the levels of government more smoothly.

How these changes will play out for the county and the region remain to be seen, and face national and global forces beyond local control. But in a time of challenge, change may prove to be a good thing.